Adverse weather in South America has buoyed U.S. corn and soybean prices. Corn and bean prices declined sharply in mid-November and remained at the lower level through mid-December. From
mid-December through early January, however, the cash price of corn in central Illinois increased by 78¢, while the cash price of soybeans increased $1.21 per bushel.
One of the factors that have contributed to higher prices is adverse weather in parts of Argentina and southern Brazil. Periods of extremely high temperatures and well-below-average levels of precipitation in December have threatened both the corn and soybean crops in those areas, notes University of Illinois economist Darrel Good.
"It is difficult to assess potential corn and soybean production in Argentina and Brazil, but the pattern of production in 2008–09 might provide some guidance," Good says. The weather pattern has been similar to that of 2008–09, when corn and soybean production was substantially reduced in Argentina. Rain hit the dry areas in early January, but the forecast called for a return of hot,
dry weather later in the month.
In early December 2008, USDA judged 2009 corn production potential in Argentina at 710 million bushels. The final production estimate was nearly 17% smaller. The 2009 Brazilian corn crop was forecast at 2.1 billion bushels in December 2008, but actual production was nearly 5% less, at 2 billion bushels.
In early December 2011, USDA forecast the 2012 Argentine corn crop at about 1.14 billion bushels.
If production is eventually reduced by 17%, as it was in 2009, the crop would come in at about 950 million bushels. Similarly, USDA has pro-jected the 2012 Brazilian corn crop at about 2.4 billion bushels. If production is reduced by 5%, the crop would total 2.3 billion bushels.
For soybeans, USDA projected the 2009 Argentine crop at 1.855 billion bushels in December 2008, but the crop ended up at only 1.175 billion bushels, nearly 37% less. The size of the Brazilian crop was forecast at 2.168 billion bushels in December 2008 but came in at 2.124 billion bushels. In December 2011, USDA projected the 2012 Argentine soybean crop at 1.95 billion bushels and the Brazilian crop at 2.755 billion bushels. Reductions similar to 2009 would result in crops of 1.23 billion bushels and 2.7 billion bushels, respectively. Production would be 775 million bushels lower.
Reductions of that magnitude would boost U.S. corn and soybean exports, Good says.